Industrial Capacity Utilization: Bearish Foreshadowing?

Simply put, we found the industrial production report to be terribly bearish for the US economy. Ten months ago the Federal Reserve began expanding the monetary base and as we have written this should lead to an uptick in industrial production within six months.

Click to enlarge:

In April, we were relieved at the stabilization in the IP number. The “less bad” print gave hope that the economy may be bottoming. However, the decline in Industrial Production in May was rather disappointing. In fact, it suggests that the monetary policy of the Federal Reserve is still not working. While the Empire State Index showed optimism for the next 6 months, actual factory usage suggests continued weakness.

Capacity Utilization fell to 68.3 in May, a new record low. If the economy were staging a recovery we would expect capacity utilization to begin to increase. This data leaves us very concerned that the economy could suffer the dreaded “double dip” recession.

Disclosures: none

Comments

[ain't no fo...:]

The slack caused by a collapse in demand pervades virtually all areas of the system and seems to be acting as a countertrend force to the ongoing panicked actions of central banks and the world's governments at large as they "push on strings" and nothing responds.

Well, actually something responds - the media outlets, the analysts, pundits and assorted, financially motivated green shoot shills of the world respond with their ridiculous fiction designed once again to quell the discontent of the masses.

As far as US dynamics play out, all roads lead inevitably to the consumer (currently representing approximately 70% of GDP), and the consumer is not, can not, and will not for years to come be in a position to purchase at anywhere near the voracious level they did when they were sustaining a worldwide industrial infrastructure geared up for massive endless growth.

But somewhere on the road to Mt Olympus, a strange, unanticipated thing happened. Growth stopped. Can you believe that? It actually STOPPED! Yet the bloated infrastructure remains, while the consumer is hiding under the covers watching netflix and hoping the foreclosure notice doesn't appear in the mailbox tomorrow.

Under conditions such as we are experiencing today, all this string manipulation is having a realistic result - NOTHING.

Jun 18 11:29 AM

[ola:]

where did you get the correlation/r-squared numbers... those look waaay too high for those two time series.

Jun 18 12:40 PM